The Experts' Guide to Managing Finances Through Crisis & Beyond
The past few months have taught us many things: the impact of togetherness, the power of balance and simplicity, and, most significantly, the importance of saving. Crisis or not, managing money brings about a fair share of anxiety—that’s what led us to Cristina Livadary and Stephanie Bucko of Mana Financial Life Design in the first place. The duo shared their essential tips for saving and spending a few years back, and we’ve been following their sage words of wisdom ever since. Class is now back in session: we returned to the experts for a second lesson on financial planning framed within our present reality.
- Rip & Tan: With the economy shifting and many experiencing financial instability, managing money feels wrought with anxiety. How can we keep a normalized approach to our finances?
- Mana: Money is connected to some of our deepest emotions. During times like this it’s important to recognize that all that anxiety and fear you have about money will bubble up to the surface, and that’s okay. Pay attention to these feelings and stay curious about them, don’t push them aside. If you want to normalize your approach to your finances, you have to have discipline. We recommend creating a financial life plan to generate wealth. Once the plan is created, automate your savings— don’t allow shifting market conditions to deter you.
- Rip & Tan: What advice do you have for individuals facing COVID-related financial hurdles?
Mana: Get educated on the public programs that have been bolstered in this time to serve you. A new federal law, the Coronavirus Aid, Relief, and Economic Security (CARES) Act, was passed in March and made sweeping changes to help Americans this year. Unemployment insurance is now available to self-employed individuals, small business relief has been replenished through various Small Business Administration programs, and federally-held student loan principal and interest payments have been automatically suspended through September 30,2020.
We’d also encourage you to think about ways you can cut your spending while you’re at home. One idea we’ve shared with clients is around car insurance. Since we’re all working from home, it’s likely you are driving much less than you were. If you’re driving less, call your car insurance company and request to reduce the number of miles on your insurance policy. We’ve heard of savings anywhere from $20 to $120 per month, depending on how little you are driving by comparison to what you’re insured for. A worthwhile 20 minutes of your time!
One hot topic has been mortgage deferment—we recommend not doing this unless you absolutely have to. If you do choose deferment, be sure to read the fine print before proceeding. In many cases, if you defer your mortgage you will owe 4 months of payments in 4 months’ time.
- Rip & Tan: Expectations around saving have shifted for many of us in the recent months. What are some realistic goals to keep in mind during these times?
Mana: One thing this moment has taught us is the importance of an emergency fund. Before the crisis, 70% of Americans didn’t have enough money in their checking account to cover a $400 surprise expense. We’ve heard from so many people that they are saving more money now, which is the perfect reason to get 3-6 months of monthly expenses into your emergency fund. The “right: amount for your emergency fund is really dependent upon job stability and the size of your family.
Taxes for 2019 aren’t due until July 15th, so you can postpone paying taxes until then or prioritize getting them done if you’re expecting a refund. That also extends the deadline for contributions to Individual Retirement Accounts (Traditional IRAs or Roth IRAs). If you haven’t already maxed out your retirement contributions for 2019, contributing to these accounts will benefit you in the future.
- Rip & Tan: What are small changes we can make today that will positively impact our financial health?
Mana: Simplify your bank structure. Nobody needs 5 checking accounts. Understand how your money flows through each account.
Automate where possible. This means paying at least the full statement balance of your credit card every month on the same day. Establish an automatic savings into both your savings and investment accounts, even if you start small this will make a big difference over time. Once you get used to saving that amount, you can increase it periodically.
Create a Mindful Spending Plan. Having a plan for spending, saving and investing will remove the risk of your emotions taking control of your actions.
- Rip & Tan: How can we use this time at home to create new spending habits? Any practices to help us refresh our approach and perspective?
Mana: Most people don’t know how much they spend on a monthly basis. Get in touch with those numbers— how much do you earn and how much do you spend and/or save each month? There are lots of personal finance apps out there that can help you do this for free.
Get very clear on what you need to cultivate in your life to be truly happy. If any of these things cost money, get started on saving. Many of our clients are saving for their dream home, their once-in-a-lifetime trip, or extended time off from their careers. Save with purpose.
- Rip & Tan: The idea of “pay now, enjoy later” feels relevant now more than ever. How does this mindset relate back to the Mana Financial philosophy?
- Mana: We believe that money is a tool, meant to be spent intentionally, to fund your highest dreams. Too many people put off living into true happiness until they feel like they have “enough”. At Mana, we dig deep into each clients’ definition of “enough” and help them work towards a life that they’ll be truly happy to live one to two years in the future. We use proactive savings to fund those near-term goals, exemplifying that consistency in your savings can lead to happiness quicker than you thought.
- Rip & Tan: What does financial freedom look like? What steps can we take to attain steady financial freedom?
- Mana: Financial freedom is unique for everyone. Turn off your phone, TV, and any distractions and ask yourself: What are the three essential elements I need in my life today to feel truly fulfilled? Once listed, think about what steps you can take to find these three elements in your life. This is a quick exercise anyone can do to steadily move toward their own financial freedom.
- Rip & Tan: From compassionate finance to holistic planning, the financial terms used at Mana feel far from intimidating. How do you turn the uncertain pathway of investing into an experience rooted in humanity?
Mana: Many of us have similar dreams. But how good are dreams if you’re not actively and strategically working towards them? We are trained to help structure clients’ lives with intelligent designs, expert strategies, and most importantly, results. In fact, 67% of Americans who use a financial advisor believe they have clarity on how much to spend now and save for later compared to 44% of those Americans without an advisor. But many people think of finance and think it’s a cold, lifeless spreadsheet painted in only two realities: red or black.
But to us at Mana, money lies at the heart of some of your greatest hopes and fears, with complex shades of grey that must be listened to and understood. This means bringing your money out of the abstract and into life.
We all want to use money better and grow our wealth. But sometimes our brains have their own agenda; which, sometimes, need to be re-written to make progress. In our careers on Wall Street one thing has become clear: your beliefs about money affect how you save, spend and generally behave around it. And no amount of knowledge or planning will help until you face these beliefs.
- Rip & Tan: What are the most important rules to remember when it comes to saving, spending, and investing?
Mana: Saving: Create a plan. Start today. Automate if you can.
Spending: Think about more than just the month ahead. After figuring out your essential expenses and proactive savings, the remainder is yours to spend, free of guilt. Spend it joyfully. Only use a credit card if you’re able to pay it off each month.
Investing: Don’t put all your eggs in one basket. Diversify away your risk— own a little bit of a lot things. Be aware of the fees you’re paying in your investments—the higher the fee, the less money you’ll make over time.
- Rip & Tan: What do you wish you knew about personal finances when you were beginning your career?
Mana: We wish there was more education around financial wellness when we began our careers on Wall Street. Even though both of our careers centered around investing, we learned very little about why it was important to save and invest.
Financial wellness happens when you spend and invest your money in ways that give meaning to your life. And this meaning is tied to your life’s biggest goals and dreams. “Is this purchase supporting my life goals?” That’s the kind of thinking that begins to reap the biggest rewards. Because the irony is that when you start spending more meaningfully, you begin increasing not just your happiness, but also your wealth.